What happens to a country's public finances and economic resilience when the natural capital it depends on begins to deteriorate? This is the question at the heart of nature finance: not simply how to fund individual conservation projects, but how ecosystem health affects the economy as a whole.
What if Nature Were Included in a Government's Balance Sheet?
Forests, mangroves, coral reefs and seagrass meadows contribute to economic output, protect infrastructure, support productive activities and reduce exposure to extreme events. When these natural assets deteriorate, the costs ripple across the entire economy: lower revenues, higher public expenditure, reduced productivity and greater exposure to climate-related risks.
This is why nature is becoming increasingly relevant to sovereign finance. The SWAN – Sovereign Wealth and Nature approach, a platform launched in New York in September 2026 with Tonga and Panama as its first sovereign partners, uses economic valuation not to put a price on nature's intrinsic value, but to make its benefits, dependencies and risks visible in the decisions of finance ministries and investors (SDG News, 30 September 2026).
The Nature Finance Gap
The global nature finance gap is estimated at approximately $942 billion per year (Paulson Institute, 2025). For Sustainable Development Goal 14, Life Below Water, the World Economic Forum estimates that around $175 billion in annual investment will be needed by 2030, compared with less than $10 billion invested in total between 2015 and 2019 (Johansen & Vestvik, 2020).
Philanthropy and public funding alone are not enough. Attracting private capital, however, requires more than a credit: it requires credible markets, robust data, clear rules and mechanisms that reduce risk for investors.
From Nature Credits to Public Balance Sheets
One of the most significant developments could come when the value of nature is incorporated into public accounting systems. SWAN, Global Resilience Partners and Blue Green Future are working with the International Public Sector Accounting Standards Board (IPSASB) on the new IPSAS 51 standard, with the aim of improving how natural resources are represented in financial statements.
The underlying principle is significant: ecosystem restoration is not merely an environmental expense. It can also be understood as an investment in preserving a productive asset and reducing future risks. The same reasoning raises important questions for central banks and institutional investors. Ralph Chami, for example, proposes accepting carbon credits as collateral in central bank operations to accelerate the development of nature markets.
Patient Capital and Debt Instruments
Ecosystems generate value over decades, while businesses and asset managers are assessed over much shorter cycles. Chami describes this as a horizon mismatch.
Pension funds and insurance companies have long investment horizons, but nature finance remains an immature market, characterised by small-scale projects, uncertain revenues, illiquid investments and assets without credit ratings. Family-owned businesses, with their capacity to deploy more patient capital, may be better positioned to absorb initial risks (SDG News, 18 September 2026).
On the debt side, Belize's 2021 debt-for-nature swap enabled the country to repurchase a $553 million commercial bond through $364 million in guaranteed blue bonds. Public debt fell by approximately 10% of GDP, and the country committed to protecting 30% of its waters.
What Is Needed to Develop a Credible Nature Finance Market?
Turning these ideas into credible financial instruments requires at least five conditions:
- Robust legal frameworks and governance systems.
- Shared standards for accounting, measurement and valuation.
- Insurance, guarantee and de-risking mechanisms to help mobilise private capital.
- Reliable, transparent and verifiable data.
- Meaningful engagement with local communities and ecosystem stewards.
Above all, progress requires dialogue between disciplines that have traditionally operated in separate silos: science and economics, ecosystem analysis and public finance, and public institutions and the financial sector.
Frequently Asked Questions About Nature Finance
What is nature finance?
Nature finance encompasses the instruments, markets and rules that connect ecosystem health with economic and financial decision-making, from individual restoration projects to sovereign balance sheets.
Can nature credits become a new asset class?
Potentially, yes, but the market is still developing. Credibility will depend on shared standards, reliable data, robust verification systems, clear rules, sufficient liquidity, risk-reduction mechanisms and the involvement of local communities.
Why does nature matter to finance ministries?
Ecosystem degradation can lead to lower public revenues, higher government expenditure and greater exposure to economic and climate-related risks. Conversely, ecosystem restoration can help reduce these risks and protect the natural assets on which economic activity depends.
In short, the question is not simply how much nature is worth. It is also how much it costs to lose it, and how much value a healthy natural environment can generate for an economy over time.
For an introduction to the topic, read our article Nature Credits: What are They and How Much Biodiversity Worth
